Head of Macroeconomic Research
Summary: The Federal Reserve is scheduled to announce its latest policy decision today at 6:00 p.m. GMT. We do not expect any major policy changes. Attention will likely shift to the central bank's nine liquidity facilities and the sharp increase in its balance sheet.
Context: Early this week, the Fed has expanded the scope and the duration of the Municipal Liquidity Facility in order to buy debt from counties and states with population of at least 500,000. The central bank will lend up to $500bn through the facility. Since the first week of March, the Fed has reacted fast and strongly to the crisis. It is basically engaged in unlimited QE to make sure the dollar funding market does not freeze. It has lowered the level of interest rate to all-time low between 0-0.25% and announced several credit support programs to help Main Street and Wall Street to cope with the crisis (see our G7 Policy Tracker for further details). As a result of all these measures, the Fed’s balance sheet increased by over $2.3tr in less than two months to reach a total of $6.6tr.
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